The ECB is due to announce its decision at 1145 GMT, followed by a news conference by ECB President Mario Draghi. A Reuters poll of economists showed the majority expect the central bank to cut its main rate by 25 basis points to 0.75 percent, a new record low.
Most market players said a 25 basis point cut could prompt a sell-off, pushing the euro towards last week's lows just above $1.24, but the downside would be limited as the market is already positioned for a cut.
A bigger-than-expected cut of 50 basis points or any hints that emerge on how the ECB plans to respond to Europe's debt crisis, such as another long-term refinancing operation (LTRO), would be a bigger driver of market direction, analysts said.
"The bigger questions have to be over potential surprises. If the ECB were to signal something more aggressive like another LTRO, in this environment that could get a euro positive response," said Daragh Maher, currency strategist at HSBC.
"If they were to go for 50, for carry trade merchants that would be deeply negative but those who like rewarding currencies where you have policy pragmatism could see it as a positive."
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